What is the by-product of a booming economy, proposed tax legislation changes (higher), and buyers flush with cash? – a sellers’ market which is currently yielding premium purchase prices and advantageous/risk reducing terms and conditions. For any business owner, the transition of ownership is a significant, inevitable moment in the business owners’ career and personal life. Advanced planning for this event is critical to achieving favorable valuations and terms, handling the transaction in the most efficient manner, and securing the best possible outcome. As you and/or your confidants consider the sale of your life’s work, be aware of the following key components of a successful transaction:
Deal Team. Assembling your deal team of M&A experienced attorneys, wealth managers, and a qualified investment banker takes time and research. A quality and diverse deal team of specialists is of the utmost importance when executing a transaction. It is crucial to find the right fit for each respective role as an owner will be spending a considerable amount of time with their advisors throughout a sale process. By identifying and assembling a team early, advanced preparation can occur; this advanced preparation allows for a nimble, well-timed entrance into the market.
Timing is key. Selling a company to achieve optimal results is a time consuming, intimate, and personal process. Preparing for a fully marketed process takes a significant time investment from those that know the business and, because involving key employees is often not ideal, it’s important for an owner to set aside a minimum of 30-60 days of plentiful access to their advisors.. Quality advisors can work with a business owner to extract needed information about the business and apply that information in creative ways to cloak the process, allow maximum confidentiality, and shield the fact that a potential sale process is occurring. It is critical to limit widespread awareness of the sale process as having too many people “in the know” can bring unwanted attention and hamper employee sentiment. If selling in 2022 is a desired outcome, prepping materials now (Q4 or Q1) allows a seller to seek and retrieve information in a more methodical and unalarming fashion.
Taxes. The future tax environment is unknown, but it is widely believed that rates will increase in the near future. Although speculation shouldn’t be the determining factor in your decision to sell, scenario analysis and proper tax planning should be considered.
We are currently experiencing a limited number of high-quality businesses (sizeable, strong management, etc.) and historically high levels of capital (Private Equity & Corporate Funds). Companies today are being sold for multiples previously unseen. Proper planning will allow you to place yourself in front of the right buyers at the right time. For any questions or guidance related to the buy or sell-side of the market, contact VonLehman’s expert team today at kcarlson@vlcpa.com or 800.887.0437.
